Warranty of Misinforming as an Option in Product Utilization Process

Abstract

The following definition of “option” is given in Wikipedia - “In finance, an option is a contract which gives the buyer (the owner or holder) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date, depending on the form of the option.”. Option as a risk management (mitigation) tool is broadly used in finance and trades. At the same time it introduces asymmetry in the sense that, probabilistically, it limits the level of loses (i.e., the price of option) and allows for unlimited gains. In the market of sophisticate devices (as smart phones, tablets, etc.), where technologies are rapidly advancing, customers usually do not have the experience to use all features of the device at the time of purchasing. Due to the lack of appropriate expertise, the risk of misinforming leading to not purchasing the "right" device is high, but given enough time to learn the capabilities of the device and map them to the problems faced could provide the client with substantial long term benefits. Warranty of misinforming is the mechanism to provide the client with the opportunity to explore the device and master its features with a limited risk of loses. Thus, the warranty of misinforming could be considered as an option - the customers buys it (at a fixed cost) and may gain (theoretically) unlimited benefit by realizing (within the warranty) that the device can be used to solve variety of problems not considered at the purchase time. The paper investigates the learning function of warranty of misinforming, when used as an option.

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